SACRAMENTO / State's bonds off negative watch list

Published 4:00 am, Tuesday, August 10, 2004

A bond-rating agency took California off its negative watch list, saying Monday that further deterioration of the state's financial condition is not expected.

Fitch Ratings said the recently signed budget helped stabilize the state's finances but also noted that California will start the next fiscal year with a $5 billion deficit. Fitch reaffirmed the current "BBB" rating of $33.5 billion in general obligation bonds.

Fitch is the first of the three major credit rating agencies to react to adoption of the state's new budget.

"It's another sign of recognition from the financial markets that California is finally turning its financial fortunes around," said H.D. Palmer, a spokesman for the Department of Finance.

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But Democratic state Treasurer Phil Angelides noted the announcement leaves California with the nation's lowest credit rating, and said the state's continued deficit spending can ruin chances to restore that rating to higher levels.

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